Government amends accounting rules in Companies Act for post-Brexit

A new statutory instrument has been passed by the UK Government, the effect of which is to remove references to European Economic Area (EEA) jurisdictions and allow continued compliance with the Companies Act 2006, following the UK’s impending exit from the European Union.

The purpose of these changes is to enable the Companies Act to remain in operation post-Brexit, using the term 'exit day' to allow for any extension, if required, rather than specifying a date.

What Are The Details?

SI 2019/145 was passed on 30 January and replaces references to the EEA with the UK throughout the Companies Act 2006. These amendments impact several key areas of the Companies Act, particularly those surrounding company filing exemptions which have been summarised below:

  • Small Companies: Following exit day under the amended regulations, an entity will only be able to qualify as small if it is not admitted to trade on a UK regulated market. Unlike the current framework, this will permit entities who are admitted to trade on a EEA regulated market to prepare and file their accounts under the small companies regime should they meet all other small entity criteria.
  • Dormant Companies: The exemption from preparing and filing accounts of dormant companies will require the parent to be established in the UK as opposed to under the law of any EEA State.
  • Consolidation: For intermediate parent companies in the UK, the previous exemption from preparing consolidated accounts will only be available where a UK parent further up the group prepares consolidated accounts, as opposed to an EEA parent. Furthermore, the previous exemption from preparing consolidated accounts (when accounts are prepared further up by a non-EEA parent) will be extended to include groups with an EEA parent.

Why Does This Matter?

These amendments are effective in relation to financial years beginning on or after exit day. It will be crucial for companies to maintain awareness of the changes to ensure continued compliance with the Companies Act 2006.

How Can We Help?

If you are a UK company with EEA parents and are concerned about how these changes may affect your business, contact our team to find out how we're able to assist you.

Louise Morriss
Managing Director
+44 (0)20 7430 5892
lmorriss@fl-crs.com